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I have one account that I tell myself is a safe spot, but is it really? Equal amounts in the following funds. RPHIX CBLDX ICMUX RSIIX DHEAX NRDCX RCTIX SWVVX
Enter it in Portfolio Visualizer (PV) or Stock Rover (SR), find portfolio SD and compare with SP500 SD. Relative SD or effective-equity will provide you with an idea of its market exposure.
That's what I was in the process of doing. (I assume SWVVX should be SWVXX; for PV I substituted CASH.)
Forward looking (simulation) rather than retrospective. NRDCX is too new to include so I dropped it from the simulation. I assumed this was taxable account, mid-range (22%) tax rate, no withdrawals. It does okay but not surprisingly doesn't quite keep up with inflation.
RPHIX has a 0.5 correlation coefficient with cash (R² around 0.25). Everything else hardly correlates at all with cash, though they have correlation coefficients pairwise around 3/4 (R² around 1/2).
There's one obvious risk factor that doesn't show up in the numbers - management risk. A majority of these funds (excluding the MMF) are managed by David Sherman. While he's an outstanding manager, if he makes a misjudgment, that could propagate through all his fund to varying degrees. In addition, a common manager aggravates succession risk - all the Riverpark/CrossingBridge funds might need to change managers at the same time. (They may already have multiple managers which can mitigate but not remove this risk.)
@msf assumed equal allocations. But based on SD indicated, under the new M* classification, it's conservative-allocation, and within that, at the lower end of the 15-30% equity allocation.
I have one account that I tell myself is a safe spot, but is it really? Equal amounts in the following funds. RPHIX CBLDX ICMUX RSIIX DHEAX NRDCX RCTIX SWVVX
What is a safe spot? In 2022 many bond funds lost 5-12% EGRIX easily beat the funds above in the last several years
Within stocks: QLEIX has better performance and a sharper ratio (risk/reward) than VOO/SPY in the last 3 years.
No way is that a safe portfolio based on the credit quality of several of the funds mentioned. In your favor I doubt we ever have a bond bust ala 2022 in my lifetime ( which is pretty short) Then again if we get another 2008 you are toast because of the less than investment grade.
Some people assess risk using standard deviation and/or Sharpe & Sortino ratios for relatively short periods. These metrics may not tell the entire story — especially during good times. Junkster makes an excellent point that the underlying fundamentals should be taken into consideration.
Relative SD = SDportfolio/SDbenchmark. I just use SP500 for benchmark.
TestFol also provides rolling SDs, so you can see it overtime. But SDbenchmark also has similar variations, and that's why Relative SD becomes more stable.
While PV doesn't have rolling SDs, it does have Drawdowns over the run periods (so does TestFol).
In looking at PV simulation data by @msf, assuming equal holdings by the OP, Drawdown was about 2xSD, and SD was around 2.5. So, even in bad scenarios, the Drawdown may be in mid/high-single-digits. If one cannot tolerate that, then use money-market funds.
No way to know because every crisis or bear market is different. With bond (“income”) funds I always look at the M* “portfolio” section which shows the % breakdown of the bonds held from AAA (top grade) thru BBB (lowest investment grade) down to the BB / C grades which are junk. Not a bond person, but I try to have a preponderance of investment grade in whatever I do hold. Like Buffett says, “When the tide goes out you know who’s been swimming naked.” So a lot of stuff looks perfectly safe until you hit something like 2008.
Interesting thread. I moved to a very defensive posture mid-year in light of the outperformance of many markets recently. Actually lost a bit today (due to some defensive holdings and short positions). But that’s another topic.
First, I would like to say thank you for your responses. The purpose of this part of my overall portfolio was to provide ten years (need to add two additional positions) of relatively stable income to replace a pension that disappears upon my death, for the benefit of my wife. I never invested in bonds during my accumulation years, but have suffered some significant losses since I added bonds at various times since I have retired. This latest move into bonds was with the hope that maybe it would be different this time if I selected bond funds with good management. I have moved two funds into this portfolio to make it now ten, SCHD and CGDV. I may replace some of the present positions in bonds with other dividend-oriented funds. I have talked to a number of successful investors over the years, who have consistently recommended stocks that pay a dividend. Again, thank you for the responses. I probably need to figure this one myself. The ups and downs of stock funds are nothing new to me, and I accept the risks, but losing money invested in a bond fund is frustrating to me, since I have naively thought of them as safe spots. FYI, my wife and I are both 81 years young.
Comments
Forward looking (simulation) rather than retrospective. NRDCX is too new to include so I dropped it from the simulation. I assumed this was taxable account, mid-range (22%) tax rate, no withdrawals. It does okay but not surprisingly doesn't quite keep up with inflation.
PV simulation
RPHIX has a 0.5 correlation coefficient with cash (R² around 0.25). Everything else hardly correlates at all with cash, though they have correlation coefficients pairwise around 3/4 (R² around 1/2).
There's one obvious risk factor that doesn't show up in the numbers - management risk. A majority of these funds (excluding the MMF) are managed by David Sherman. While he's an outstanding manager, if he makes a misjudgment, that could propagate through all his fund to varying degrees. In addition, a common manager aggravates succession risk - all the Riverpark/CrossingBridge funds might need to change managers at the same time. (They may already have multiple managers which can mitigate but not remove this risk.)
So, the question to OP: What's worrying YOU?
EGRIX easily beat the funds above in the last several years
Within stocks:
QLEIX has better performance and a sharper ratio (risk/reward) than VOO/SPY in the last 3 years.
These metrics may not tell the entire story — especially during good times.
Junkster makes an excellent point that the underlying fundamentals should be taken into consideration.
Relative SD = SDportfolio/SDbenchmark. I just use SP500 for benchmark.
TestFol also provides rolling SDs, so you can see it overtime. But SDbenchmark also has similar variations, and that's why Relative SD becomes more stable.
While PV doesn't have rolling SDs, it does have Drawdowns over the run periods (so does TestFol).
In looking at PV simulation data by @msf, assuming equal holdings by the OP, Drawdown was about 2xSD, and SD was around 2.5. So, even in bad scenarios, the Drawdown may be in mid/high-single-digits. If one cannot tolerate that, then use money-market funds.
Interesting thread. I moved to a very defensive posture mid-year in light of the outperformance of many markets recently. Actually lost a bit today (due to some defensive holdings and short positions). But that’s another topic.